REFILE: California voters reject raising tobacco tax

SAN FRANCISCO (Reuters) - California voters narrowly rejected a ballot measure that would have added a $1 tax to a pack of cigarettes in the state's primary election Tuesday, an outcome observers attributed to a $47 million ad blitz by the tobacco industry.

The measure, known as Proposition 29, was defeated 50.8 percent to 49.2 percent on a day of light voter turnout, according to election results posted on Wednesday by California's secretary of state. Some absentee and other ballots remained to be counted.

The result reflected a long-standing political divide in California, with San Francisco Bay area counties heavily supporting the measure, while conservative suburban counties in more populous Southern California overwhelmingly opposed it.

Revenue from the proposed tax, estimated at $735 million in its first year, would have supported medical research on tobacco-related diseases and programs to prevent and control tobacco use.

The measure, championed, among others, by the American Cancer Society and cycling great and cancer survivor Lance Armstrong, had enjoyed a commanding lead in polls earlier in the year.

But opponents, led by Altria's Philip Morris and Reynolds American Inc, vastly outspent their rivals, blanketing the airwaves in much of the state in recent weeks with a message that cast doubt on how the new tax revenues would be spent.

The result mimicked a 2006 effort at increasing tobacco taxes, which voters also rejected after a fierce industry-sponsored ad campaign.

California voters last approved a measure to increase the state's tobacco tax in 1998. It narrowly passed.

MEASURE OVERWHELMED BY ADS

Support for Proposition 29 was hampered by concerns that revenue from the tax would not go to public services, such as schools and policing, which have had their budgets slashed, said Mark DiCamillo, director of The Field Poll, which tracks California's public policy and political issues.

DiCamillo added that older, more conservative voters opposed to the measure likely had an outsized influence in an election marked by low turnout.

According to California's secretary of state, only 24 percent of registered voters cast ballots on Tuesday. That figure will increase as counties finish counting outstanding ballots.

Democratic Governor Jerry Brown unveiled a revised state budget plan last month that projected a $15.7 billion deficit. He proposed closing it with spending cuts to healthcare for the poor and elderly, savings from reduced work hours for state employees and new revenue from tax increases he plans to put to voters in a ballot measure in November.

If voters reject Brown's proposal - it would raise the state sales tax and income tax rates for wealthy taxpayers - he has said an additional $6 billion in spending, including $5.5 billion on schools and community colleges, would need to be cut later this year.

"This measure (Proposition 29) wasn't going to do anything to fix that," said Joel Fox, president of the Small Business Action Committee and a member of the coalition that opposed it. "It creates another walled-off account the governor and the legislature can't get to in difficult times."

The money poured into California to broadcast that message and others -- including claims that revenue raised by the measure could be spent outside the state -- overwhelmed supporters of Proposition 29, said Stanton Glantz, director of the Center for Tobacco Control Research and Education at the University of California, San Francisco.

The medical school's foundation contributed $50,000 to the campaign in favor of Proposition 29, according to MapLight, a nonpartisan research group.

The measure's opponents "basically went unanswered for a very long time," Glantz said, adding that supporters failed to raise sufficient funds early for a sustained offensive to offset the deep pockets of the tobacco industry.

The two sides raised over $59 million for the campaign, with proponents raising over $12 million of that, according to MapLight.

"Had the health groups had a little more money a little bit earlier, they probably would have prevailed," said Glantz, who noted that there was a slim chance that vote-by-mail, provisional and damaged ballots that have yet to be processed could give Proposition 29 a victory.

The margin of victory was 63,000 votes out of 3.85 million votes cast.